Finance Health Math Other Blog
Login

Break Even Calculator

Enter Your Data
Rent, salaries, insurance, etc.
Materials, labor per unit, etc.
Price you charge customers
Desired profit amount
Results

Enter your cost data to calculate break even point

Key Features

Instant Break Even Calculation

Get your break even point in units and revenue with one click. No complex formulas needed.

Contribution Margin Analysis

See your contribution margin per unit and ratio to understand profitability.

Target Profit Planning

Set a profit goal and see exactly how many units you need to sell to achieve it.

Export & Share Results

Download your calculations as PDF, CSV, or JSON for reports and presentations.

How to Use This Calculator

  1. Enter Fixed Costs - Add up all your monthly fixed expenses: rent, salaries, utilities, insurance, loan payments, and any other costs that don't change with production volume.
  2. Enter Variable Cost per Unit - Calculate the cost to produce or sell one unit: raw materials, packaging, shipping, sales commissions, and direct labor per unit.
  3. Enter Selling Price per Unit - Input the price you charge customers for one unit of your product or service.
  4. Set Target Profit (Optional) - If you want to know how many units you need to achieve a specific profit, enter that amount here.
  5. Click Calculate - Get your break even point, contribution margin, and all key metrics instantly.

Understanding Your Results

Break Even Units

The exact number of units you must sell to cover ALL your costs (both fixed and variable). At this point, you have zero profit but also zero loss. Every unit sold beyond this earns pure profit.

Break Even Revenue

The total sales revenue needed to break even (Break Even Units × Selling Price). This is your minimum monthly/yearly revenue target to avoid losses.

Contribution Margin

The amount each unit "contributes" toward covering fixed costs (Selling Price - Variable Cost). Higher margin = faster break even and more profit per sale.

Contribution Margin Ratio

What percentage of each sale goes toward covering fixed costs and profit. A 40% ratio means 40 paise of every rupee earned covers fixed costs.

Pro Tip: A higher contribution margin ratio (above 40%) indicates a healthier business model with more pricing power. If your ratio is below 20%, consider raising prices or reducing variable costs.

Break Even Calculation Formulas

Core Formulas
Break Even Units = Fixed Costs ÷ Contribution Margin
Contribution Margin = Selling Price - Variable Cost per Unit
Break Even Revenue = Break Even Units × Selling Price
CM Ratio = (Contribution Margin ÷ Selling Price) × 100%
Units for Target Profit = (Fixed Costs + Target Profit) ÷ Contribution Margin
Step-by-Step Example

Given:

  • Fixed Costs = ₹1,00,000/month (rent, salaries, etc.)
  • Variable Cost = ₹30/unit (raw materials, packaging)
  • Selling Price = ₹50/unit

Calculation:

  1. Contribution Margin = ₹50 - ₹30 = ₹20/unit
  2. Break Even Units = ₹1,00,000 ÷ ₹20 = 5,000 units
  3. Break Even Revenue = 5,000 × ₹50 = ₹2,50,000
  4. CM Ratio = (₹20 ÷ ₹50) × 100 = 40%

Result: You need to sell 5,000 units (₹2.5 lakh revenue) monthly to break even. Every unit beyond 5,000 earns ₹20 profit!

Real-World Examples

Business Type Fixed Costs Variable Cost Selling Price CM Break Even
Bakery ₹50,000/mo ₹15/item ₹40/item ₹25 (63%) 2,000 items
Restaurant ₹2,00,000/mo ₹150/meal ₹400/meal ₹250 (63%) 800 meals
E-commerce Store ₹1,00,000/mo ₹500/product ₹1,200/product ₹700 (58%) 143 products
Coffee Shop ₹80,000/mo ₹20/cup ₹80/cup ₹60 (75%) 1,334 cups
Software SaaS ₹5,00,000/mo ₹50/user ₹500/user ₹450 (90%) 1,112 users
Clothing Boutique ₹1,50,000/mo ₹800/item ₹2,000/item ₹1,200 (60%) 125 items
Key Insight: Notice how SaaS businesses have the highest contribution margin ratio (90%). Digital products have near-zero variable costs, making them highly scalable and profitable once past break even.

Common Mistakes to Avoid

Forgetting Hidden Costs

Many businesses forget to include: payment gateway fees (2-3%), returns/refunds (5-10%), wastage, shrinkage, and seasonal variations. Always add a 10-15% buffer to your calculations.

Mixing Fixed and Variable Costs

Salary of a production worker may seem fixed, but overtime pay is variable. Rent is fixed, but utility bills may vary. Classify costs carefully for accurate results.

Ignoring Price Sensitivity

Break even assumes you'll sell all units at the same price. In reality, discounts, bulk pricing, and competition affect actual revenue. Plan for 10-20% lower than calculated.

Not Recalculating Regularly

Costs change! Raw material prices, rent increases, and market conditions shift. Recalculate your break even point at least quarterly to stay on track.

Overestimating Sales Capacity

Just because you need to sell 1,000 units doesn't mean you can. Consider production capacity, market demand, and sales team capability when setting targets.

Ignoring Time Value

Breaking even in 6 months is very different from 3 years. Factor in how long it will take to reach break even and whether you have enough runway (cash) to survive until then.

Frequently Asked Questions

Break Even Point is the exact point where your total revenue equals your total costs - you neither make profit nor loss. It tells you the minimum units you must sell to cover all expenses. Beyond this point, every additional sale is pure profit.

Fixed costs remain constant regardless of production volume. Examples include: rent/lease payments, salaries of permanent staff, insurance premiums, loan EMIs, depreciation, annual licenses, and fixed utility charges. These must be paid even if you sell zero units.

Variable costs change directly with production volume. Examples include: raw materials, packaging, shipping/delivery charges, sales commissions, payment gateway fees, production labor (per unit), and direct supplies. The more you produce, the higher these costs.

Three strategies: (1) Reduce Fixed Costs - negotiate rent, go remote, outsource non-core functions. (2) Reduce Variable Costs - find cheaper suppliers, optimize processes, reduce waste. (3) Increase Selling Price - add value, improve branding, target premium segment. Each 10% reduction in fixed costs can lower break even by 10%.

It varies by industry: Retail: 25-35%, Restaurants: 60-70%, Manufacturing: 30-50%, SaaS/Software: 80-95%, Services: 40-60%. Generally, above 40% is considered healthy. Below 20% indicates thin margins and high risk.

Recalculate: Quarterly (at minimum), When costs change significantly (raw material price hike, rent increase), When launching new products, When entering new markets, During strategic planning. Keep a spreadsheet to track changes over time.

Additional Resources

Related Business Calculators
Helpful External Resources
Break Even Strategy Tips
  • Know Your Numbers: Track all fixed and variable costs accurately
  • Margin Focus: Higher contribution margin = faster break even
  • Price Wisely: Factor in all costs before setting price
  • Monitor Regularly: Recalculate when costs change (quarterly minimum)
  • Safety Buffer: Target 20-30% above break even for profitability
Learn More
Related Tools
Important Disclaimer

This calculator provides estimates for business planning only. Actual results may vary based on market conditions, seasonal factors, unexpected costs, and competitive pressures. The assumptions used in break even analysis (constant pricing, linear costs, and stable volume) may not reflect real business dynamics. For major strategic decisions, consult a qualified financial advisor or business accountant to validate these calculations with your specific circumstances.